Fitch Rates Guilford County, North Carolina's $56.6MM GOs 'AA+'

Business Wire, Jan 6, 2005

NEW YORK -- Fitch Ratings assigns an 'AA+' rating to Guilford County, NC's approximately $56.6 million in general obligation (GO) refunding bonds, series 2005C. The bonds are expected to sell competitively on Jan. 11. Fitch affirms the 'AA+' rating on the county's $261.9 million in outstanding GO bonds. The Rating Outlook is Stable. The county expects to issue $183.2 million in variable-rate GO bonds for delivery Feb. 2. Fitch will assign ratings to the variable-rate bonds, based on both long- and short-term considerations, closer to their closing.

The 'AA+' rating is based on Guilford County's diverse and growing economic base, moderate debt levels, solid financial position, and conservative budgeting practices. Reserves remain sound after use of capital projects fund reserves in the past two fiscal years to compensate for weakness in tax revenues. School funding requirements will likely continue to create pressure on general fund operations. The bonds to be offered shortly include $150 million as the first installment of a $300 million school bond referendum approved by county residents in November 2003. Voters approved an additional $67 million in GO bonds for parks, recreation, and community college facilities in November 2004. Even with the additional bonds, the county's debt burden should remain moderate, as the county has historically used substantial amounts of general fund resources for school capital outlay.

Guilford County is located in the Piedmont region in the center of the state. County population, estimated at 438,520 in 2004, grew 21% during the 1990s and another 4% since 2000. The county includes the cities of Greensboro (the county seat) and High Point. Some textile manufacturing activity remains in the county, but its prominence has been superseded by a more diversified mix of manufacturers and growth in other sectors, including health care, other services, and office headquarters. High Point is internationally known as a furniture manufacturing center. Commercial, residential, and industrial development continue throughout the county, and unemployment has declined over the past two years. Long-term economic growth prospects are enhanced by Federal Express Corp.'s plans to locate an east coast hub at the county's Piedmont Triad International Airport and the recent announcement by Dell Inc. that the company will locate a new manufacturing facility in nearby Winston-Salem. Income levels are above state averages.

Financial operations have yielded strong balances, although the effects of a weak economy are evident in the past two fiscal years' performance. Increases to the fund balance in fiscal years 2003 and 2004 were mainly the result of transfers from the building construction fund, which accumulates funds to offset rising debt service costs. The fiscal 2005 general fund budget continues to rely, although to a lesser extent, on a transfer from this capital projects fund, which still maintains an adequate available balance of about 3% of general fund spending. Sales tax revenues have been especially weak, as retail sales have declined in three of the past five fiscal years and, in fiscal 2004, were 5% below their fiscal 2000 level. The fiscal 2005 budget incorporates a property revaluation that increased assessed valuation (AV) by a sound 22%; revaluations are conducted on an eight-year cycle. AV growth in the interim years was moderate, although it slowed to about 1% in each of the two fiscal years prior to the revaluation. The property tax rate was reduced to a below-average $0.6184 in fiscal 2005, slightly above the revenue-neutral rate.

The county's debt levels will remain below average with the issuance of the upcoming $183 million in variable-rate bonds. Most of the variable-rate bonds are for school construction, pursuant to a $300 million voter authorization approved in November 2003. The county's five-year capital improvement plan (CIP) for fiscal years 2005-2009 appears manageable, totaling $850.5 million, including projects previously authorized. Schools needs, which constitute 79% of the total, will mainly be debt funded. Funding sources for nearly all capital spending are identified in the CIP.